PSEG Long Island Thursday assumed one of the Long Island Power Authority's last vestiges of authority when it took the lead role in directing the region's power-resource planning.
With the new year, a team of staffers from a LIPA division known as Power Supply Long Island officially shifted over to PSEG, and with them went one of the most significant roles LIPA has played over the past 15 years: deciding which new power plants, cables and green-energy facilities to develop or retire.
Much is at stake. LIPA last year had been eyeing dozens of new projects that would have obligated customers for billions of dollars in additional costs tied to long-term energy contracts.
Since then, with advice from PSEG, LIPA has put the brakes on many of those projects, including the largest: the proposed 750-megawatt, gas-fired Caithness II power plant in Yaphank, which LIPA awarded in 2013.
However, some industry observers who have welcomed PSEG's arrival on the scene expressed concern that the company's vast power holdings in New Jersey and elsewhere -- including fossil-fuel and nuclear generators -- could sway its decision making, a concern that PSEG says is unfounded.
LIPA's power markets group analyzes all of Long Island's power resources and makes decisions about new plants based on projections on how the need will be met. The group also is responsible for decisions affecting the power supply charge -- the sometimes volatile component that makes up half of customer bills.
Since this summer, PSEG at LIPA's request has been conducting a strategic review of the entire LIPA power-resource system. The review, overseen by Paul Napoli, vice president of power markets, reported in August that LIPA has adequate power sources to meet demand until 2020.
In addition to putting the brakes on Caithness II, the report influenced LIPA's decision to halt plans for five small power plants known as peakers that are used only during peak-use times.
"PSEG brought a nice, professional dose of reality" into regional power decisions, said Marc Alessi, a former Democratic state assemblyman from Wading River who is stepping down from the LIPA board of trustees as of Dec. 31. "If it staves off unneeded new power plants, it saves us a lot of money."
'A really hard look'
Alessi said PSEG's analysis gave Long Island residents a new awareness of power decisions and their impact. The report in August "made everybody take a really hard look not only at what we were about to purchase, but what we have been purchasing in the past," Alessi said.
In the report, PSEG recommended that LIPA postpone any financial commitments on new power sources until it completes an analysis of the LIPA system and all proposals. That review will produce what PSEG is calling an integrated resource plan by the end of 2015.
Some longtime LIPA critics have turned PSEG supporters.
Energy consultant Thomas Bjurlof called the PSEG review of LIPA "one of the most important things that has happened in terms of the capacity planning" on Long Island, and said he expects the same from the finished review next year. "It's really high-quality stuff," Bjurlof said.
In an interview, David Daly, president of PSEG Long Island, promised "more of the rigor and fresh thinking that we've seen this year," as PSEG fully takes over the power markets function.
The resource plan will provide a thorough look at all LIPA's current power resources and analyze the impact of a range of system additions that have been proposed. LIPA, for instance, had been under pressure to overhaul -- or "repower" -- several existing National Grid-owned power plants.
Daly vowed that decision making under PSEG will have a "very strong focus on transparency" with a "balancing of objectives." Among the objectives: cost, fuel diversity, geography, climate goals and renewable targets, and system reliability.
The integrated resource plan will start with a "base case" that will examine the power system, determine what may be needed in terms of new sources, and then review options, starting with the lowest-cost scenario. From there, it will examine different "scenario cases," Daly said, showing how each new power source would affect the system, including its impact on rates.
Filling power gaps
Some recent decisions are "hard-wired" into the plan, he said, including LIPA's approval of 122.1 megawatts of power from large solar energy facilities in Suffolk County.
Daly said a focus of the review will be filling power gaps around the Island, some of which could have been addressed by the peaker plants LIPA shelved. "We know we have problems on the East End, Far Rockaway and Glenwood," he said, noting that some new green-energy sources could be located to serve those needs.
PSEG also will be working under New York's Reforming the Energy Vision mandate that calls for green and efficient power solutions that increase market competition and offset the need to build expensive new plants.
While most say PSEG's fresh perspective is needed, some are concerned the company's vast energy holdings could influence decisions. PSEG has holdings in fossil-fuel and nuclear plants as well as renewable energy, including an interest in a proposed wind farm with Deepwater Wind, which recently was rejected as part of LIPA's green-energy bid request.
"It does trouble me," said Sheldon Sackstein, chairman of the Suffolk County Legislature's LIPA Oversight Committee. "They held off on a new plant here, held off there, and the next thing you know, they could say, 'We'll supply you.' "
The company denied any such possibility.
"There is absolutely no conflict between PSEG [Energy] and PSEG Long Island power markets," Daly said. "They are separated by a firewall. I don't anticipate any conflicts."
John McMahon, chief executive of LIPA, said the authority will provide a separate check on potential conflicts: "We have oversight over them and will make sure that doesn't happen."